Bitcoin vs. Ethereum – Things to Know – Cryptopolitan
Bitcoin and Ethereum – These are the two popular cryptocurrencies used today all over the world. Although they are both based on blockchain technology and share a few similarities, they have significant differences, which set them quite apart. Visit this link if you want to invest in bitcoin.
About Bitcoin
Bitcoin was the first cryptocurrency, created in 2009 and designed to be the digital store of value and the primary means of exchange. The main goal is to act as an alternative to the traditional fiat currency and the current financial system. The Bitcoin supply will be limited to over 21 million coins, but as of February 2023, around 18.8 million coins have already been mined.
About Ethereum
On the other hand, Ethereum was formed in 2015 as a decentralized platform for creating smart contracts and decentralized applications. The original cryptocurrency of Ethereum is called Ether and is used to pay transaction fees and motivate participants to secure the network. Unlike BTC, Ethereum has no fixed supply cap, or new Ether coins will be created as a reward to the network participants for verifying the transactions and adding new blocks to the blockchain.
Main difference
A huge difference between Bitcoin and Ethereum is its approach to consensus algorithms. BTC uses Proof of Work, where miners compete to solve complex mathematical equations and validate their transactions or add new blocks to their blockchain. The process needs a significant amount of computational power, which is becoming more and more energy-intensive, thus leading to concerns about the impact of Bitcoin mining.
Ethereum is in a massive transition from the PoW algorithm to the Proof of Stake algorithm. In PoS, participants put named validators on Ether to validate the transactions and add new blocks to the blockchain. Validators will be selected to validate the transactions based on the amount of Ether they have staked, so they will be rewarded in the form of transaction fees and newly minted Ether. This PoS algorithm is expected to reduce the energy consumption of this Ethereum network.
Another difference between Bitcoin and Ethereum is the approach to scalability. BTC’s blockchain will process only seven transactions a second, thus making it slower than traditional payment systems like Visa, which will handle thousands of transactions every second. On the other hand, Ethereum will process over 15 transactions in a second, which is still relatively slow, but faster than Bitcoin.
To solve the problem of scalability, Ethereum is developing a new protocol called Ethereum 2.0, which aims to significantly increase the network’s capacity to process transactions. The protocol will introduce a new shard chain architecture, which will enable parallel processing of transactions, and it will also introduce the PoS consensus algorithm.
Bitcoin and Ethereum also have different approaches to smart contracts. These smart contracts are self-executing contracts with terms in the agreement between the buyer/seller directly written in the lines of code. Ethereum’s platform is designed specifically for smart contracts and dApps, while Bitcoin’s is primarily designed for financial transactions.
Ethereum’s smart contracts are more flexible and powerful than Bitcoin’s, allowing developers to build complex applications on top of the platform. This has led to a thriving decentralized finance (DeFi) application ecosystem, which is revolutionizing traditional financial systems. Bitcoin’s smart contracts, on the other hand, are relatively simple, focusing mainly on enabling transactions on the Bitcoin network.
In conclusion, Bitcoin and Ethereum are the most popular cryptocurrencies with different approaches and goals. Bitcoin aims to be a digital store of value and a medium of exchange, while Ethereum aims to be a decentralized platform for creating smart contracts and dApps. They also have different approaches to consensus algorithms, scalability and smart contracts. While both cryptocurrencies have their strengths and weaknesses, they continue to be at the forefront of the cryptocurrency revolution and are expected to play a significant role in shaping it.
